Protecting your adult children: The under-appreciated benefit of a revocable living trust

The golden age of the pension plan is waning. Social security is at risk of going bankrupt. The divorce rate has risen, and can wreak financial havoc in a person’s life. How will your children retire? While you may not be able to protect them from these possibilities, your estate plan can serve as a piece of financial security for them when and if any of these things come to pass. Consider the following ways a trust can protect your children after you are gone:

A spendthrift trust does not allow most creditors to invade the trust to settle the debt of the beneficiary (not the grantor). A notable exception is for child support.

Consider including a distribution scheme that delays the distribution of a beneficiary’s share until the beneficiary is older, and hopefully has matured, developed a work ethic, and settled into a longer-term marriage.

Some people divide the distribution of the principal of the trust into portions given to the children at various ages, to give them some access when they are younger and buying a house and perhaps starting a business, and retaining some for later, so as to give the child a safety net to weather the storms, such as divorce, than can pop up young adulthood and middle age. Income is usually distributed every year, reserving the principal until the appointed age.

You can make your own retirement plan for your child by postponing principal distribution until your child is of retirement age.

If addiction is a concern, the trust can retain the funds until the trustee is satisfied that the addiction is under control.

A trust can state that no distribution will be made pending a divorce.

Using ascertainable standards for discretionary principal distributions, such as health, education, maintenance and support, gives the flexibility to use principal when appropriate, with guidance.

Note that special needs children also need planning for when you are gone, but use a different type of trust.

If your child receives trust proceeds, they should place it in an account in their sole name, and not use the proceeds for regular household expenses, to show they have a special equity in the funds in the event of a divorce.

It’s good to know that just a little planning for your children’s future can afford them some level of protection from the uncertainties of life.

Jennifer L. Fulton, Esq. is an attorney at The Law Offices of Robin Bresky (www.breskylegal.com) focusing on Estate Planning, Probate, and Estate and Trust Administration. A member of the Florida Bar since 1996 with a Juris Doctor degree from Nova Southeastern University, Fulton works with clients to plan for the milestones of life (college, “adulting”, marriage, children, grandchildren, aging parents, pre- and post-divorce, loss of a spouse, aging, diminished mental capacity) and administration upon death. She can be reached at 561-994-6273 or EstatePlanning@BreskyLegal.com.

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